The Hindu Business Line : Govt planning law to make warehouse receipts negotiable

Mr. Jignesh Shah, Chairman-cum-Managing Director, Financial Technologies India Ltd (left) exchanging documents with Mr Alok Ranjan, Managing Director, Nafed, after signing a memorandum of understanding for setting up `National Spot Exchange' in the presence of Mr Sharad Pawar, Union Agriculture Minister, in the Capital on Thursday. Mr Ajit Kumar Singh, Chairman, Nafed, looks on. — Ramesh Sharma

New Delhi , Feb. 10

THE Government is planning to introduce a legislation to make warehouse receipts a negotiable instrument in order to facilitate increased agricultural lending by banks, the Union Agriculture Minister, Mr Sharad Pawar, said here on Thursday.

Speaking on the occasion of the signing of a memorandum of understanding between the Multi Commodity Exchange of India Ltd (MCX) and the National Agricultural Cooperative Marketing Federation of India (Nafed) for setting up a National Spot Exchange for Agricultural Produce (NSEAP), Mr Pawar said the legal backing for warehouse receipts would make banks increasingly willing to lend to agriculture and wholesale trade against these instruments.

This would, in turn, reduce the cost of public support for agricultural marketing, besides bringing down transaction costs and improving price-risk management. The Minister welcomed the proposed setting up of NSEAP, which seeks to link all the major commodity mandis or Agricultural Produce Marketing Committees (APMC) and other physical market players through an electronic platform.

"An important advantage of this market is that it would disseminate referral national spot prices on real-time basis for the benefit of farmers. This would help meet an important concern — the lack of a common national price discovery for any commodity in the country," Mr Pawar stated.

Meanwhile, the Managing Director of MCX, Mr Jignesh Shah, told reporters that futures trading in crude oil at the exchange had made an impressive start, with the very first day of trading on Wednesday witnessing 3,14,100 barrels being transacted for an aggregate value of Rs 63.04 crore. While volumes for the April contract amounted to 2,61,900 barrels (Rs 52.56 crore), the May contract saw trade of 52,200 barrels for Rs 10.48 crore.

"The first trading on crude oil futures at MCX recorded one per cent equivalent trading volume of New York Mercantile Exchange," Mr Shah said.

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